Modi 'can revive India’s position as global expanding power'

Economic panel bullish about results of potential BJP victory

by Michael Klimes

Mon 28 Apr 2014

As Indian voters go to the polls this month in the world's most populous democracy, many commentators expect Narendra Modi, the charismatic and controversial chief minister of Gujarat, to become the nation’s next prime minister.

Some concerns about Modi's character and style are shared about India’s economy – but the overall outlook appears relatively optimistic.

These topics were the subject of a discussion, organised by the Centre for the Study of Financial Innovation (CSFI) with OMFIF on ‘The Indian elections: Implications for the economy and the financial sector’, at the London Capital Club, 23 April 2014.

The panellists included Lord (Meghnad) Desai, OMFIF advisory board chairman, consultant Deepak Lalwani and fund manager Avinash Vaziran. They presented the case that Modi was the right man at the right time to inject the reforming zeal needed to put India back among the first rank of expanding powers on the world stage.

High inflation, a growing current account deficit and anaemic growth by Indian standards were all listed as factors holding back the nation from further economic expansion.

The incumbent United Progressive Alliance (UDA), consisting of the Congress party and its allies, had become impotent in the last three years, the panellists said.

It was observed that Modi, while chief minister of Gujarat, acquired the reputation as a reformer who excelled at job creation by attracting investment from abroad.

Furthermore, a Bharatiya Janata Party (BJP) government, which is more liberal economically than Congress, combined with a possible landslide victory, would give Modi the necessary platform to reinvigorate India’s fortunes, they added.

Desai argued that India needed a stable government to ensure the economy returned to higher growth. He predicted that in 2015, India’s growth rate could hit 6.5% and move higher afterwards.

Lalwani and Vazirani said that FDI and capital that left India during the last few years should return with a more pro-business government running India.

Yet all agreed that Modi and the BJP do have a public relations problem with Muslims who make up the country’s largest minority group. Modi attracted criticism during his reign as chief minister of Gujarat during communal riots in 2002.

However, the panellists said that Modi’s party would not pursue a hard line brand of Hindu nationalism, as it would have to rule from the middle ground to maintain power.

Although any reform programme started by Modi would be painful in the short term, the panel agreed that the longer-term rewards of curbing inflation, shrinking the current account deficit, creating jobs and boosting growth would justify some initial hardship.